Government removes strict credit score rules to make credit easier to access

The New Zealand government is scrapping strict creditworthiness rules to make it easier for consumers to access credit. Trade and Consumer Affairs Minister Andrew Bayly and Housing Minister Chris Bishop have announced that from 31 July, eleven pages of detailed creditworthiness requirements under the Credit Contracts and Consumer Finance Act (CCCFA) will be removed.

“Previous regulations imposed excessive and detailed criteria that made the loan application process confusing and stressful for consumers,” Mr. Bayly said. “These regulations not only burdened consumers, but also increased compliance costs for lenders, particularly affecting the availability of small loans under $5,000.”

Mr Bishop highlighted the frustration experienced by mortgage applicants at the intrusive nature of the rules, which included overly detailed checks on personal expenses. “The rules were too stringent, requiring lenders to verify information against external sources and check minor personal expenses, which was both ineffective and intrusive.”

The removal of these provisions is consistent with the National-ACT Coalition’s promise to reform the CCCFA to balance consumer protection with fair access to credit. The updated approach includes replacing the prescriptive provisions with a revised Responsible Lending Code that provides guidance on reasonable inquiries to assess creditworthiness while giving lenders the flexibility to consider individual circumstances.

Mr Bayly said lenders would still have to assess creditworthiness responsibly and would be penalised for failing to make reasonable enquiries. “Our focus is on managing the risk of bad lending without imposing unnecessary restrictions,” he said.

The changes were made following consultation with lenders and budget services, many of which expressed support for the revised framework. “Today’s reforms aim to restore flexibility and allow New Zealanders to access credit more easily, while ensuring that loans are only made to those who can afford them,” Mr Bishop added.